Online music and computer game seller Play.com is to make more than 200 staff redundant with the closure of its retail arm, a move it says is due to the Government ending a VAT loophole.
The company, which was one of the first online retailers when it launched in 1998, will lay off 67 workers from its Cambridge and Bristol bases and 147 in Jersey.
It says it has been forced to take the step due to the ending of Low Value Consignment Relief, a scheme which allowed items less than £15 to be sold to the UK free of VAT.
The Government ended the tax relief scheme last April after UK-based retailers complained they could not compete with firms that did not have to factor VAT into prices.
Play.com will now focus on its marketplace business, which acts as an intermediary for third parties to sell items. The business has been owned by Japanese e-commerce giant Rakuten since September 2011.
When it was bought for just £25 million, some analysts took it as a sign that the online pioneer had been underperforming in recent years.
In a letter to staff, the company said: "We have reviewed our strategic plans and we are very sorry to announce that we are proposing to phase out and close the 'retail' part of our business by the end of March 2013."